Initial Europe Feb MEG CP seen as premature, Jan CP fully confirmed

24 January 2013 12:23[Source: ICIS news]

LONDON (ICIS)--An initial European February monoethylene glycol (MEG) contract price settlement at €1,105/tonne ($1,473/tonne), up €37/tonne from the now fully confirmed January price, is premature, buyers and a seller said on Thursday.

"You have to be careful to settle so early in Europe because you don't know what happens in the last days of January. Same as in December, we [broke up] for Christmas and the Asian market spiked up," a seller said.

A buyer said it was shocked that an initial February price has already been agreed, considering there is still no February settlement for upstream ethylene.

"We think €1,105/tonne is too high and there is no justification for this as spot prices in Asia have not moved up for quite some time now," a second buyer said.

Thursday saw Asian spot prices reach a new low at $1,155-1,160/tonne CFR (cost & freight) China Main Port (CMP). These were quick to rebound by $15-20/tonne following news of reduced output at Taiwan’s Nan Ya Plastics in Mailiao, according to ICIS.

It is understandable that the industry wants to move forward and finally settle the January price and for an MEG buyer for antifreeze, it sends the right message to pass onto its end users, the seller said.

As for downstream polyethylene terephthalate (PET), the market is in the doldrums and producers have been struggling to keep up with raw material price increases.

"For the PET industry [a February MEG price increase] is going to go down like a lead balloon," the first buyer said.

"We need to have compensation to reflect that the European contract price is based on the previous month [in Asia], so the [European] price should go up in January and in February," the seller said.

The initial European February price includes compensation for January's €1,068/tonne, according to a second seller who confirmed it had indeed agreed to follow the initial January settlement on Wednesday.

"€1,100/tonne would have been the figure for February, without the compensation," he said.

The contracts were agreed on a free delivered (FD) northwest Europe (NWE) basis.